[vanessa000abc]

1)if a CPA’s mother own 1 share of stock in client’s company

2)if a CPA’s wife own 1 share of stock in client’s company

3) if a CPA’s fiancé own 50% of stock in client’s company

also on Becker A1-9, it gives us an example that an auditor owns an insignificant amount of of the client’s common stock, which is “independent in fact but not independent in appearance.

I am really confused with independent in fact and independent in appearance. Can someone give me an example that “not independent in fact but independent in appearance?

Thanks

[Sheree]

I am still working in this area but my best idea is INdependent in appearance is what other perceive on you, independent in fact is your best emotional/mental influence in making a decision. PLease someone correct me if I am wrong. My best example is your Q “3) if a CPA's fiancé own 50% of stock in client's company” The fiancee is still independent in appearance but your decision will be influenced by your relationship with her (thats the independence in fact/mental)

[lyzgrace]

I personally did not focus on the “appearance” part of independence. I don't believe I ever ran into a practice question that made you answer that, and I think the reason is because it's an auditor judgement call. Just like how the test will never make you judge whether or not an amount is material. It's just one big bad grey area.

I would just make certain you understand the difference between direct and indirect financial interest, allowable interest percentages for non-covered members of the firm, allowable job descriptions for close family members, etc. Others may have different experiences, but I would not get worked up over understanding fact vs. appearance. Focus on fact =)

AUD: 82
FAR: 78
BEC: 75
REG: 8/1 score release!!

[jamesb]

@lyzgrace…I agree.

Know these key points from A1:

Direct ownership will impair independence (material or immaterial)

indirect ownership will impair independence (material ONLY)

indirect ownership will NOT impair independence (immaterial ONLY)

AUD: TBA-
FAR Done
BEC Done

Becker
NINJA for AUD

[vanessa000abc]

Thanks for the inputs. to Jame, I understand what you have said here. But my questions is that whether the father of CPA owns immaterial stock of client's company will impair the cpa's independence.

[lyzgrace]

Parents are generally close family, in which case he could have an immaterial financial interest.

In the event that the father were a dependent of the CPA, he would be immediate family, in which case he could NOT have a financial interest.

AUD: 82
FAR: 78
BEC: 75
REG: 8/1 score release!!

[vanessa000abc]

lyzgrace, thanks. I think your answer is correct. what about 3)?

[lyzgrace]

That answer would make me uncomfortable, I'll admit, but it's still technically not an independence issue. Unless all other answers were obviously compliant, I would not say that there was an independence problem if a fiance had a material interest.

AUD: 82
FAR: 78
BEC: 75
REG: 8/1 score release!!

[Author]

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